Crown Resorts Melbourne CEO ‘knew of tax underpayment for years’

The head of Crown’s Melbourne casino knew the company could have been underpaying taxes for years, but only recently escalated the issue.

Crown Melbourne chief executive Xavier Walsh, centre, arrives at the commission hearing in Melbourne on Monday. Picture: AAP

The head of Crown Resorts’ Melbourne casino knew for years the company was potentially underpaying state gaming tax in a way that could be “cheating” the taxman, but didn’t escalate the issue until the day after the Victorian royal commission into the company was called, the commission has been told.

Newly installed Crown Melbourne CEO Xavier Walsh also told the commission that he informed directors Jane Halton and Toni Korsanos of the issue shortly after he raised it with executive chairman Helen Coonan in February, expanding the list of people that had knowledge of it.

But crucially Mr Walsh did not tell any of them what the ­potential underpayment might be, prompting allegations from counsel assisting he had “effectively downplayed the significance of the issue” and the suggestion Crown may have “cheated” on its taxes.

“I think there is a potential that we have (underpaid), I don’t know definitively, yes or no, whether we have or haven’t,” Mr Walsh said.

The revelation last month that Crown may have underpaid gaming tax by counting player benefits such as free hotel rooms and meals as bonus jackpot “winnings” and then offsetting it against poker machine revenue caught the commission off-guard.

The Crown board was also shocked when it heard through commission hearings that internal spreadsheets prepared by Crown manager Mark Mackay indicated that the size of the underpayment could be as much as $272m.

Mr Walsh told the commission on Monday that he was first made aware of the issue in 2018, when he was the chief operating officer of Crown Melbourne, through a six-year-old presentation about implementation of the practice that said the Victorian Commission for Gaming and Liquor Regulation was “unlikely” to notice it.

He said he was uncomfortable with the practice – but only brought the “historical” issue to Ms Coonan on February 23 this year, one day after the Victorian commission was announced and shortly after Ms Coonan became chair. Ms Coonan then directed the issue be reviewed and disclosed, leading to the creation of Mr Mackay’s spreadsheets.

Commissioner Raymond Finkelstein asked Mr Walsh why he sat on the issue for years, ­especially when he had seen external legal advice on the practice that was “equivocal” on its ­legality.

“If it bothered you, why didn’t you do something about it from 2018 on?” he said. “It couldn’t have bothered you that much, because you did nothing.”

Mr Walsh said he didn’t earlier disclose the practice because the VCGLR had investigated Crown’s tax payment structure in 2018 and “not asked any further questions”, and denied being ­influenced to raise the issue due to the announcement of the royal commission.

Commissioner Hon. Raymond Finkelstein AO QC (left) is seen during Victoria's royal commission into Crown Casino. Picture: AAP Image/James Ross

“I was actually concerned that … the chairman had been speaking at length about ensuring that we had a change of culture and that items that had not been deal with or that anyone had any residual discomfort with should be raised,” Mr Walsh said.

“Her expression was ‘bring out your dead’.”

He also told the commission that because Mr Mackay’s spreadsheet recorded some deductions that were legitimate, he was confident the liability would not be more than $40m, rather than $272m.

The debate over who knew what about the tax issue has become a sticking point for the commission, which is trying to work out if the profit-first culture that led to the NSW Bergin inquiry revoking the licence for its Sydney casino is still existent at the company, despite recent reform efforts spearheaded by Ms Coonan.

Counsel assisting spent much of the day tying Mr Walsh with that culture, noting his long tenure with the company, an attempt to set up a new company bank account that was closed by CBA over money-laundering concerns and his apparent willingness to settle a debt with a SunCity junket operator, Alvin Chau, in November last year, despite Mr Chau’s links to organised crime being a major focus of the Bergin inquiry.

They also highlighted his attempt to argue to the VCGLR in January that Crown’s vetting process for junket operators was “robust” – even though months earlier the Bergin inquiry heard admissions from Crown executives that improvements could have been made.

Mr Finkelstein, who last week expressed scepticism about Crown’s reform efforts, doubled down on Monday.

“Wherever I look I see not just bad conduct, but illegal conduct, improper conduct, unacceptable conduct, and it permeates the whole organisation,” he said.

“One thing that seems to be missing in all the ‘born again, we’ll be good’ is self reflection.”

The commission continues on Tuesday.